It was announced recently, Altria Group – the owner of Philip Morris – will acquire a 35% in e-cigarette maker Juul Labs for $12.8 billion. The deal values Juul at $38 billion.
A Controversial Deal
The deal is not without critics however. According to Juul Labs CEO Kevin Burns, ‘We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the US. We were skeptical as well. But over the course of the last several months we were convinced by actions, not words, that in fact this partnership could help accelerate our success switching adult smokers. We understand the doubt. We doubted as well.’
Assuaging Juul Employees
According to the terms of the deal, Altria’s stake in the company will be capped at this 35%. In order to assuage concerns of employees, it was also announced a $2 billion dividend will be set aside to be dispersed between Juul’s 1,500 employees. This dividend likely comes in response to dissatisfaction voiced by employees when news of the talks broke last month.
Advocacy Groups Alarmed
The announcement of the deal also has many advocacy groups up-in-arms. In responding to the deal, CEO and president of The Truth Initiative – famous for its anti-smoking campaigns – remarked, “This investment gives the tobacco industry direct access to a new pipeline of millions of youth e-cigarette users, most of whom were not smokers in the first place.”
Large Player in a Growing Industry
The vaping industry itself has been booming. The number of vapers in the United States has grown from just over 7 million in 2011, to more than 40 million in 2018. Currently, the global vaping market generates over $22 billion annually, as compared to just $4 billion five years ago. According to Grand View Research, this number is also expected to climb to over $47 billion by the year 2025. Juul is currently the industry’s largest company.
Health Concerns Remain
The full extent of the health risks associated with e-cigarttes are not yet fully understood. However, some 49% of vape users do claim they use e-cigarttes to ween themselves from tobacco. Whether or not the long term effects of vaping are as bad as traditional cigarettes is yet to be determined.